Preserving Eligibility for a Later Date

In the case where an ORP participant is eligible for post-employment benefits, wants to draw assets from the plan prior to becoming a retiree (for GIC purposes) and wishes to maintain their eligibility for post-employment benefits for a later date, the plan administrator will determine the amount of assets that must remain in the ORP to ensure an adequate retiree Income at a future date.

When making this determination, the administrator will follow the rules outlined below.

Married Participants: For eligible employees who are married at the time of their request for a distribution, the administrator will consider the amount of remaining plan assets sufficient to pay future premiums for retiree insurance where:

The present value of a joint and survivor annuity (50% benefit to the survivor) is sufficient to provide an initial monthly income at the participant’s normal retirement age (65) that is adequate relative to the total premium for the Commonwealth’s Comprehensive Indemnity Plan for two individuals under the Medicare rate in effect at the time the request for a distribution is made.

For purposes of this determination, the following assumptions will be used:

1. Information relating to the annuity income and present value calculation will be solicited from the ORP provider holding the greatest amount of plan assets for the participant;
2. The annuity income (projected to age 65 income start date) will be derived from the provider’s current annuity rate tables for a fixed annuity, without either guarantee periods or cost of living adjustments;
3. If the participant has already attained age 65, the annuity income start date will be the first of the month after the administrator receives the request for a distribution, or as soon as is practical;
4. The discount rate used in determining the present value of the projected annuity income will be the provider’s current assumed interest rate for the projected annuity;
5. In the case where a provider does not offer annuity contracts, then the plan administrator will choose a reasonable proxy for the provider, beginning the selection process with other providers currently available under the program; to the extent possible, the plan administrator will select the proxy based solely on the highest assumed interest rate among current providers;
6. The second annuitant is assumed to be the same age as the participant.

Single Participants: For participants who are not married at the time of their request for a distribution, the administrator will consider the amount of remaining plan assets sufficient to pay future premiums for retiree insurance where:
The present value of a single life annuity is sufficient to provide an initial monthly income at the participant’s normal retirement age (65) that is adequate relative to the total premium for the Commonwealth’s Comprehensive Indemnity Plan under the Medicare rate in effect at the time the request for a distribution is made.

For purposes of this determination, the following assumptions will be used:

1. Information relating to the annuity income and present value calculation will be solicited from the ORP provider holding the greatest amount of plan assets for the participant;
2. The annuity income (projected to age 65 income start date) will be derived from the provider’s current annuity rate tables for a fixed annuity, without either guarantee periods or cost of living adjustments;
3. If the participant has already attained age 65, the annuity income start date will be the first of the month after the administrator receives the request for a distribution, or as soon as is practical;
4. The discount rate used in determining the present value of the projected annuity income will be the provider’s current assumed interest rate for the projected annuity;
5. In the case where a provider does not offer annuity contracts, then the plan administrator will choose a reasonable proxy for the provider, beginning the selection process with other providers currently available under the program; to the extent possible, the plan administrator will select the proxy based solely on the highest assumed interest rate among current providers.